CANADA’S OIL AND NATURAL GAS INDUSTRY

ENERGY TOMORROW

CANADA’S OIL & NATURAL GAS PRODUCERS

Energy Tomorrow: Why the World Needs More Canadian Energy

THE GROWING WORLD WILL REQUIRE MORE ENERGY, IN ALL FORMS.

RENEWABLES AND NEW ALTERNATIVE SOURCES WILL INCREASINGLY

SUPPLY A LARGER PART OF THAT ENERGY MIX. BUT THE WORLD IS ALSO

GOING TO NEED OIL AND NATURAL GAS FOR A LONG TIME.

HOWEVER, THOSE RESOURCES MUST BE PRODUCED IN A NEW, BOLD WAY

THAT RELIES ON TECHNOLOGY, INNOVATION, AND HIGH ENVIRONMENTAL

PERFORMANCE STANDARDS.

A GLOBAL VISION FOR ENERGY

A wave of global energy demand is coming, as billions of people – especially in

developing economies – turn to oil or natural gas for home and industrial uses, as

transportation fuels, and as feedstock to make products from cell phones to medical

equipment, paint to plastics, clothing, and more. In fact, the world will need about 11

million more barrels of oil a day by 2040 – 10 million barrels in India and China alone.

Canada has the third most oil in the world, and produces the fifth most natural

gas. This gives us the opportunity to share our incredible resource wealth. But do

we have a clear vision? Bold leadership? Are we innovating enough to turn our

imagination into action?

Yes, yes, and yes.

TECHNOLOGY AND INNOVATION

Some of the strongest voices against petroleum development are concerned

about greenhouse gases. But Canada’s upstream petroleum industry is working

to break the link between energy growth and emissions growth.

For example, through Canada’s Oil Sands Innovation Alliance (COSIA), oil sands

companies are inventing and using leading-edge technology. This unique, world-

class partnership is dedicated to reducing impacts on air, land, and water. To

date, they’ve developed and shared more than 900 distinct technologies worth

more than $1.3 billion.

Other examples: the Petroleum Technology Alliance Canada (PTAC) facilitates

innovation, collaborative research and technology development, demonstration,

and deployment for a responsible Canadian hydrocarbon industry, helping

Canada become a technology leader. And the Clean Resource Innovation

Network (CRIN) is a newly formed network that unites industry, academia,

government, innovators, investors, researchers and businesses to accelerate

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Tim McMillan President and CEO

Canadian Association of Petroleum Producers

innovation and commercialization of ground-breaking technologies. CRIN is

helping make Canada’s oil and natural gas sector a global leader and centre of

expertise in developing clean hydrocarbon-based energy.

ENGAGEMENT AND REGULATION

Canada’s petroleum industry supports the principles of the United Nations

Declaration on the Rights of Indigenous Peoples (UNDRIP) and has developed

guiding principles that govern respectful relationships, unique cultures

and traditions, respect for the environment, and sustainable benefits for

Indigenous communities.

Canada also has among the world’s highest standards for environmental

protection. A 2014 study by Worley Parsons selected 10 producing areas (the U.K.,

Norway, the U.S. Gulf Coast, Australia (Queensland), North Dakota, Ghana, Brazil,

Oman, Malaysia, and Alberta) and compared environmental laws and government

processes with respect to stringency. The study revealed that Alberta, Canada is a

consistent leader in environmental policies, laws and regulatory systems.

ENERGY TOMORROW Unlike many petroleum producing countries, Canada has very high environmental

standards, a commitment to Indigenous engagement, and thriving innovation and

collaboration. Canada is a safe, reliable and technologically savvy energy partner.

Canada is poised to be a global energy supplier of choice. That’s why Canada can

– and should – play a larger role in the world’s energy of tomorrow. Canada can

balance the world’s energy needs with our planet’s environmental imperatives.

In Canada, we have everything to help get the world’s energy future right.

Resources. People. Passion. Ideas. Collaboration. Innovation.

I invite you to learn more about the commitment of Canada’s upstream petroleum

industry to protecting air, land, and water, engaging in a meaningful way with

Indigenous Peoples, and collaborating to develop innovative technology that will

help the world transition to a lower-carbon future.

Sincerely,

Tim McMillan, President and CEO

Canadian Association of Petroleum Producers

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Global Energy Pulse: The World Wants More Canadian EnergyTo understand the extent of Canada’s opportunity and the potential reception of

Canadian energy products in the global market, in 2017 the Canadian Association

of Petroleum Producers (CAPP) commissioned a report titled Global Energy Pulse.

Researchers surveyed 22,000 people in 32 countries about their views on energy in

general and on Canada as a supplier of choice in particular.

A key finding was that respondents prefer to obtain energy from their own country’s

resources, but 31 per cent of respondents ranked Canada first among 11 producing

nations as the preferred supplier of oil and natural gas.

Among worldwide respondents supportive of Canadian imports, India and China –

forecast by the International Energy Agency (IEA) to see energy demand increase

by 49 and 46 per cent, respectively, by 2040 – rated Canada’s oil and natural gas

industry highly for our leading technologies to minimize environmental impacts.

Canada is uniquely positioned to become the world’s energy supplier of choice

because of our political stability, stringent environmental regulations, and a

commitment to responsible production, underpinned by the industry’s leading

innovation and technology advances.

ASIAN MARKET OPPORTUNITY

CHINA

INDIA

CURRENT 2040

CURRENT 2040

+37% 15.1

58.8

11

18.3 +222%

+154% 9.9

18.4+278%

3.9

4.9

Driven by population increases and a growing middle class, China and India willneed by 2040; an additional 10 MILLION BARRELS/DAY OF OIL AND 54 BILLION CUBIC FEET/DAY OF NATURAL GAS compared to what they consume today (IEA, 2016).

WHERE WILL THAT ENERGY COME FROM?

CANADIAN EXPORTS (2016)

3.1 MMb/d

99+% 0%

8.1 Bcf/d

Oil Reserves:170 BILLION BARRELS(3rd in world)

Natural Gas Resources:1,230 TRILLION CUBIC FEET(300 year supply)

0% Sources: IEA (2016), Oil and Gas Journal (2016), NEB

Canadian Geographic Energy IQ Program

The Royal Canadian

Geographical Society has

created a witty, informative

video about making and

moving Canada’s energy,

along with an energy-use

survey and other educational

tools. Take the survey and

learn more at:

energyiq.canadiangeographic.ca

The World Is Open To More Canadian Energy

Canada is the preferred choice

for oil and natural gas imports

out of 11 producing countries.

See the full survey results at

globalenergypulse.com

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Engaging Indigenous CommunitiesENDORSING UNDRIP

The Canadian oil and natural gas industry is proud to support the principles of

the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP)

as a framework for Indigenous reconciliation in Canada. We acknowledge the

importance of reconciliation and recognize that natural resource development is

linked to the broader reconciliation process. We further believe that implementing

UNDRIP will create opportunities for progress that will benefit all Canadians,

including Indigenous communities.

CAPP GUIDING PRINCIPLES

The Canadian Association of Petroleum Producers (CAPP) and its member

companies developed Guiding Principles for Engagement with Aboriginal

Communities. These principles reflect industry practices and are meant to be

used by CAPP member companies to guide their engagement with Indigenous

communities (First Nations, Métis and Inuit Peoples of Canada as defined in

Canada’s Constitution Act, 1982).

1. RESPECTFUL RELATIONSHIPS

We recognize and respect the existing Aboriginal and treaty rights of the

Aboriginal Peoples of Canada and seek respectful and mutually beneficial

relationships with Aboriginal communities.

2. RESPECTING UNIQUE CULTURES AND TRADITIONS

We work collaboratively with Aboriginal communities to respect their unique

cultures and traditional knowledge.

3. RESPECT FOR THE ENVIRONMENT

Throughout the full life cycle of our projects we respect the environment and

acknowledge the unique connection Aboriginal Peoples have to the land and the

environment.

4. SUSTAINABLE BENEFITS

We provide opportunities and benefits for Aboriginal communities in a sustainable

manner that supports our mutual prosperity.

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Innovating To Reduce ImpactsAIR

Canada, with less than one per cent of the world’s population, generates two per

cent of global greenhouse gas (GHG) emissions. Of that, Canada’s upstream oil

and natural gas industry – including the oil sands sector – emits 22 per cent of

Canada’s total. Canada’s oil sands sector emits fewer GHGs than the buildings,

electricity and agriculture sectors.

GLOBAL AND CANADIAN GHG EMISSIONS COMPARISON

MANAGING EMISSIONS: REGULATION AND TECHNOLOGY

There has been significant regulatory and government action in Canada to

monitor and reduce GHG emissions from the oil and natural gas industry. Canadian

governments are leading on emissions reduction, with policies in place since 1998.

For example, regulations in Western Canada’s petroleum producing provinces

have helped reduce emissions:

• British Columbia eliminated routine flaring in 2016. Since 2006, industry has

reduced annual flare volumes by 23 per cent.

Source: BC Oil and Gas Commission

• Alberta’s regulations have reduced the amount of natural gas flared by

80 per cent from 1996 to 2010.

• Saskatchewan enforces regulations for reducing flaring, incinerating, or

venting from oil and natural gas operations.

Canada’s approach to climate change ensures that Canada’s oil and natural gas

continues to be developed responsibly with world-leading environmental performance

European Union9%

Emission Intensive andTrade Industries

10%Agriculture10%

China26%

Buildings12%

Other34%

Russian Federation5% Downstream and

Transmissions4%

Australia1%

India6%

United States14%

Oil Sands9.8%

Waste andOthers7%

Other Upstream12%

CANADA 2%

Japan3%

GLOBAL EMISSIONS - 2013 CANADIAN EMISSIONS - 2015

Electricity11%

Transportation24%

Source: Environment and Climate Change Canada 2017 & World Resources Institute 2013

Our families were surprised by what we do.

You might be too.

Meet some of the people changing the future of Canadian energy at

energytomorrow.ca

ENERGYTOMORROW

6

standards to strengthen our position compared to other jurisdictions. In this way,

Canada’s oil and natural gas resources will be an important part of the lower

carbon economy on a global basis.

MANAGING METHANE

Methane contributes to GHG emissions, so reducing methane emissions from all

sources is an important way to tackle climate change. Methane is emitted from

many sources both human-made and natural, including fuel combustion, oil and

natural gas development, industrial processes, electricity generation, landfills,

livestock and wildfires.

“Fugitive methane emissions” come from unintentional leaks from valves and other

equipment used in drilling and production. “Venting” is a controlled release of

gases as part of oil and natural gas processing. Regulations and industry best

practices provide guidance to avoid venting when possible.

Canada’s oil and natural gas industry has committed to reduce methane emissions

by 45 per cent by 2025. Through relationships with regulators, governments, and

stakeholders, the industry can deliver action on climate change while realizing the

economic benefits the sector brings to Canada’s economy.

Technology is critical to reducing methane emissions from oil and natural gas

development. Advancing technology is co-ordinated through various

organizations such as Natural Resources Canada, Emissions Reduction Alberta

and universities, with the goal to develop a robust ground, aerial and satellite-

based detection network.

CANADIAN SPACE TECHNOLOGY MEETS OIL SANDS INNOVATION

Oil sands mine operators are

required to conduct annual

measurements of carbon

dioxide (CO2) and methane

emissions from tailings ponds

and mine faces, stationary

combustion and mobile

sources, collectively known as

fugitive emissions. All emissions

are reported annually to the

Alberta government.

The current measurement

method involves using a large

hood which is either floated

on the surface of a pond

or set on the mine face to

capture emissions. Operators

then measure the volume of

captured emissions and use

that to estimate total fugitive

emissions over a period of time.

In a COSIA initiative launched

in 2015, COSIA members

are working with a global

emissions monitoring company

based in Quebec to investigate

using satellite technology to

provide more accurate and

frequent measurements of

fugitive emissions.

80%Natural gas flaring in Alberta was reduced by 80% from 1996 to 2010, reducing GHG emissions by more than eight million tonnes.

Alberta and British Columbiaare committed to reducingmethane emissions by 45%by 2025.

45%

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LAND

Canadian oil and natural gas exploration, production and reclamation are regulated

by provincial and federal bodies to ensure safe, efficient and environmentally

responsible resource development. Oil and natural gas operations occur in diverse

landscapes representing many ecosystems that are home to a variety of plants

and animals. Canada’s oil and natural gas industry is working to reduce the size of

its footprint in order to maintain the biodiversity of the operational regions and to

support the function of natural ecosystems.

MULTI-WELL PADS

Advances in horizontal drilling and the use of multi-well drilling pads have greatly

reduced the amount of land disturbed for drilling operations. Several horizontal

wells drilled from a single pad can access a greater area of the reservoir from a

smaller piece of land than vertical wells drilled from single-well pads.

A 20-well horizontal drilling pad disturbs about five per cent of the land that would

be disturbed for an equivalent number of individual wells.

Canada’s oil sands resources lie under 142,000 km2 of land. About 97 per cent

of that resource could be recovered by in situ technologies, which have a much

smaller footprint than surface mining.

RECLAMATION

Reclamation is the act of returning disturbed land to a sustainable landscape.

Reclamation planning starts at the beginning of an oil or natural gas development

project and physical reclamation proceeds when resources have been depleted.

From the start of any development, producers strive to reduce their impact by

avoiding sensitive habitats, minimizing the area needed for well sites and working

with other users to share roads and pipelines.

Companies conduct a myriad of research programs to improve the efficiency and

effectiveness of their reclamation. Examples include testing new methods of soil

salvage to retain the valuable characteristics of soil nutrients and structures, as

well as seed and root stocks for revegetation, and collaborating with Indigenous

communities to select the best native plant species for revegetation.

WILDLIFE MANAGEMENT:

SUPPORTING CARIBOU RESEARCH

Under a memorandum of

understanding between the

B.C. government, CAPP, and

other industry stakeholders,

the oil and natural gas industry

voluntarily contributed up to

$10 million for caribou research

in B.C. The industry is also

participating in research and

programs to improve caribou

habitat and help increase

caribou populations.

Source: Government of British Columbia

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WATER

Canada’s oil and natural gas industry operates onshore and offshore, managing a

myriad of water resources. Safety of people and protecting the environment are

always top priorities.

HYDRAULIC FRACTURING: PROTECTING WATER

The Canadian oil and natural gas industry is highly regulated. While each province

has its own regulations, all jurisdictions have laws to manage environmental impacts,

protect fresh water, and ensure safe and responsible development.

For example, most reservoirs developed using hydraulic fracturing are found at

depths exceeding 2,000 metres, while fresh water aquifers are usually found at

depths less than 300 metres. When wells are drilled through shallow aquifers,

multiple layers of steel casing are cemented in place to isolate the aquifer from the

resource-bearing zone and all activity inside the wellbore. The protection of fresh

water aquifers is strictly regulated by provincial governments.

Protecting water during hydraulic fracturing operations is a priority for the

industry, which supports and abides by all regulations governing hydraulic

fracturing operations, water use, and water protection. In addition, the industry

is committed to following CAPP’s five guiding principles and seven supporting

operating practices.

MARINE TRANSPORT: SAFETY FIRST

Oil tankers have moved regularly and safely along Canada’s West Coast since the

1930s. In 2016, more than one million tonnes of crude oil, or about 23,000 barrels

of oil per day, was shipped from the Port of Vancouver.

Source: Port of Vancouver

While focused on preventing environmental incidents, companies also develop

safety plans and comprehensive spill response plans in the event of an

emergency. Before drilling can begin, companies must apply for authorizations

from the relevant regulatory body in Atlantic Canada – the Canada-

Newfoundland and Labrador Offshore Petroleum Board, or the Canada-Nova

Scotia Offshore Petroleum Board.

The volume and frequency of oil spills has been decreasing globally since the

1970s. A report sponsored by the Clear Seas Centre for Responsible Marine

Shipping, Commercial Marine Shipping Accidents: Understanding the Risks in

Canada, identified that large oil spills, especially those from oil tankers, have been

rare in Canadian waters.

PROTECTING OUR COASTLINES

Marine inspectors board oil

tankers travelling in Canadian

waters to make sure they have

double hulls and are in safe

operating condition.

• Local marine pilots with

extensive regional

knowledge are required to

navigate oil tankers entering

Canada’s harbours and

commercial waterways.

• Tugboat escorts are used to

guide loaded vessels

through designated water

areas – they can slow and

stop or steer the vessel.

• Navigational aids in

Canadian waters use visual,

auditory and electronic

signals to mark shipping

routes and warn of

obstructions.

Source: Clear Seas Centre for Responsible Marine Shipping, 2017

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Innovation and Technology: Improving Production, Decreasing ImpactsCollaboration and knowledge sharing are fundamental to innovation and

technology development and deployment in Canada’s oil and natural gas sector.

COSIA: DELIVERING ENVIRONMENTAL PERFORMANCE

Canada’s Oil Sands Innovation Alliance (COSIA) is an alliance of oil sands

producers focused on accelerating the pace of improvement in environmental

performance in Canada’s oil sands through collaborative action and innovation.

COSIA is scouring the world for innovations to tackle the industry’s toughest

challenges.

Through COSIA, participating companies capture, develop and share the most

innovative approaches and best thinking to improve environmental performance in

the oil sands, focusing on four Environmental Priority Areas (EPAs) – greenhouse

gases, land, water and tailings.

CRIN: SEEKING TRANSFORMATIONAL IMPACT

The Clean Resource Innovation Network (CRIN) is an industry-led network that

leverages the oil and natural gas industry’s strengths in large-scale heavy industrial

collaboration by aligning research and technology priorities, addressing gaps and

incenting innovation.

CRIN will advance technology solutions mapped against priority areas across

the oil and natural gas sector. Innovation areas will be selected for the highest

transformational impact and environmental improvements while capturing

domestic and international sales opportunities for small and medium enterprises.

Proposed technology focus areas include: carbon reduction, water, methane

emissions quantification and abatement, hydrocarbon extraction, digitization of

operations, well abandonment and site remediation.

NRG/COSIA CARBON XPRIZE

In partnership with NRG Energy

in the U.S., COSIA has launched

a global competition offering

$20 million to innovators best

able to convert carbon dioxide

emissions into usable products.

The competition is structured

as a two-track prize, with

one track focused on testing

technologies at a natural gas

facility, and the other focused

on testing technologies at a

coal power plant. A prize of

$10 million is available to the

winners of each track.

In March 2017, COSIA

announced a partnership with

the governments of Canada

and Alberta to support

construction of a test facility in

Calgary, Alberta, Canada. The

Alberta Carbon Conversion

Technology Centre will be one

of the few places in the world

where carbon conversion

technologies can be tested on

a commercial scale, and NRG

COSIA Carbon XPRIZE finalists

will be the first tenants to test

their solutions in the natural gas

track of the Carbon XPRIZE.

INNOVATING TO COMPETE

AN ALLIANCE OFOIL SANDS PRODUCERS

936 TECHNOLOGIESAND INNOVATIONS

ALMOST$1.33 BILLION

HAVESHARED

THATCOST$

Through COSIA , an alliance of oil sands producers focused on accelerating the pace of improvement in environmental performance in Canada’s oil sands have shared 936 technologies and innovations that cost almost $1.33 billion.

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PTAC: CONVENTIONAL AND UNCONVENTIONAL INNOVATION

Petroleum Technology Alliance Canada (PTAC) is a facilitator of collaborative

research and development initiatives and technology development, and operates

in partnership with all industry stakeholders to transform challenges into

opportunities.

By effectively leveraging financial resources and technical expertise, PTAC

supports collaborative networks that advance innovative research and

technology development projects that address pertinent industry challenges

through activities which reduce costs, improve operational efficiencies, enhance

environmental stewardship, and advance regulatory development.

IMPROVING METHANE EMISSIONS DETECTION

In August 2017, the Canadian

federal government announced

the launch of two new

methane emissions reduction

initiatives, funded in part by

Natural Resources Canada

and managed by Petroleum

Technology Alliance Canada

(PTAC). These initiatives

will help to identify the

most performance-effective

technology options to achieve

methane emissions reductions,

accelerate technology

development, and advance

Canada’s competitiveness.

Focus areas include advanced

methane detection, analytics

and mitigation.

Advancing to a cleaner, lower-

carbon economy that includes

oil and natural gas offers

Canada significant domestic

and international opportunities.

We have the chance to become

a global leader in clean-tech for

the development, production,

extraction, and end-use of our

hydrocarbon resources.

THE WORLD NEEDS MORE CANADA. WE ARE COMMITTED TO REDUCING OUR ENVIRONMENTAL IMPACT THROUGH INNOVATIVE

SOLUTIONS AND BECOMING THE GLOBAL ENERGY SUPPLIER OF CHOICE. LEARN MORE ABOUT OUR INDUSTRY WORK FROM THE FOLLOWING PARTNERS:

Alberta Energy Regulator (AER) – www.aer.ca

Alberta Environment and Parks – www.aep.alberta.ca

BC Oil and Gas Commission – www.bcogc.ca

Canada-Newfoundland and Labrador Offshore Petroleum Board – www.cnlopb.ca

Canada-Nova Scotia Offshore Petroleum Board – www.cnsopb.ns.ca

Canada’s Oil Sands Innovation Alliance – www.cosia.ca

Canadian Industrial Energy End-use Data and Analysis Centre (CIEDAC) – www.sfu.ca/cieedac.html

Canadian Association of Petroleum Producers (CAPP) – www.capp.ca

Canadian Energy Research Institute (CERI) – www.ceri.ca

Canadian Gas Association – www.cga.ca

Canadian Society for Unconventional Resources (CSUR) – www.csur.com

Clean Air Strategic Alliance (CASA) – www.casahome.org

Environment and Climate Change Canada – www.ec.gc.ca

Frac Focus Chemical Disclosure Registry – www.fracfocus.ca

Government of British Columbia Ministry of Energy, Mines & Petroleum Resources – https://www2.gov.bc.ca

International Energy Agency – www.iea.org

International Maritime Organization – www.imo.org

National Energy Board (NEB) – www.neb-one.gc.ca

Natural Resources Canada – www.nrcan.gc.ca

New Brunswick Department of Natural Resources – https://www2.gnb.ca

Nova Scotia Department of Energy – www.gov.ns.ca/energy/oil-gas

Petroleum Technology Alliance Canada – www.ptac.org

Statistics Canada – www.statcan.gc.ca

U.S. Energy Information Administration (EIA) – www.eia.gov

CAPP.CA 2017-0056